Economic models (usually micro-economic) use the concept of ‘Utility’ when describing balance and equilibrium. As we all know having money doesn’t necessarily make you happier (it doesn’t hurt either). Money is a very simple, straight forward and usually irrelevant variable when discussing social sciences and behaviour. As a result economists have come up with the concept of utility which quantifies the entire benefit an individual draws from a certain product, service or resource.Oddly enough, when macro economics are discussed we usually suffice with comparing GDP (gross domestic product) or GNP (gross national product) for varying countries. Obviously GDP and GNP are not measured in utility but in money. This is an unfortunate but unavoidable result of the transition from the world of model to reality.

Measuring utility is very hard (impossible some might say) as utility is subjective. Money, however, is not and as such is most suitable when comparing national economies.

However, a very interesting initiative by French prime minister Nicolas Sarkuzy has been published lately. Mr. Sarkuzy has decided to develop a model which will enable the french to include the happiness of french citizens in the calculation of the GDP of France. In order to accomplish this two Nobel winner have been recruited by the french prime minister.

This step reflects an interesting and common perspective on the financial success of the USA. The USA has with out a doubt been the more successful economy during the last 25 years but has this made its citizens happier? Hasn’t the success come at ahefty price?

There are some interesting variables to consider when trying to weigh in the general well fare of the citizens of a nation into its GDP. As an example consider leisure Having more free time with your family or friends or even by yourself most definitely produces higher utility. Including average hours of leisure has much economic sense. There are many more variable which could be introduced to the equation: Quality of the Environment, health care quality, crime levels, social equality, technological advancement, unemployment ratio, average lifespan and many many more.

Introducing these variable into our GDP, for example, might change the way we measure economic success. More importantly it just might enable us a clearer view of the more important things in life.

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This blog is about my personal opinions which are based on my financial education. My posts and articles are to be regarded with the appropriate sceptisism and should under no circumstances be used to replace professional financial assistance.